SIFR Research Report Series, Institute for Financial Research
Nature or Nurture: What Determines Investor Behavior?
(), Henrik Cronqvist
() and Stephan Siegel
Abstract: Using data on identical and fraternal twins' complete
financial portfolios, we decompose the crosssectional variation in investor
behavior. We find that a genetic factor explains about one third of the
variance in stock market participation and asset allocation. Family
environment has an effect on the behavior of young individuals, but this
effect is not long-lasting and disappears as an individual gains
experiences. Frequent contact among twins results in similar investment
behavior beyond a genetic factor. Twins who grew up in different
environments still display similar investment behavior. Our interpretation
of a genetic component of the decision to invest in the stock market is
that there are innate differences in factors affecting effective stock
market participation costs. We attribute the genetic component of asset
allocation - the relative amount invested in equities and the portfolio
volatility - to genetic variation in risk preferences.
Keywords: Portfolio choice; Investor heterogeneity; Behavioral genetics; (follow links to similar papers)
JEL-Codes: D10; G11; (follow links to similar papers)
53 pages, September 15, 2010
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Anki Helmer ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom